At N4.54tn, FGN Bonds, Sukuk Listings Out-pace Corporates on NGX

Kayode Tokede

FGN Bonds and Sukuk listed on the Nigerian Exchange Limited (NGX) stood at N4.54 trillion between January and July 2024, surpassing equities and new bond insurances by corporates in the months under review. 

FGN Bonds issued by the Debt Management Office (DMO) on behalf of the federal government are listed on the floor of the NGX.

Analysis of data obtained from the NGX showed that the FGN securities dominated listing on the Exchange so far this year.

The NGX data showed about 34 FGN Bonds have been listed between January and July 2024 worth about N4.56 trillion in market value while corporates’ rights issues, Eurobond in the period stood at N1.99 trillion.   

The bond market in 2024 has consistently witnessed increased participation by Pension Funds Administrators (PFAs) as double-digit inflation eroded investment in the capital market.

Analysts attributed the strong demand for FGN bonds to attractive yields, which offer investors high returns on their investments, stressing that the oversubscription also revealed that investors have confidence in the Federal Government’s ability to meet its debt obligations.

The appetite for FGN bonds indicates that PFAs, and Nigerian investors prefer investment instruments with less volatility that assures them of their capital returns albeit with low yield on investment.

Further analysis of the NGX data revealed that Sovereign Trust Insurance Plc in January 2024 listed N1.43 billion s Rights Issue of 2,841,116,504 ordinary shares of 50 Kobo each at 50 Kobo per share on the basis of one new ordinary for every four.

In February 2024, Ellah Lakes Plc listed N2.19 billion; Chapel Hill Denham Management Limited listed N11.58 billion while SCM Capital Ethical Fund had a memorandum listing of N411.9 million.

In March 2024, Transcorp Power Plc listed N1.8 trillion worth of shares on the NGX. The company listed a total of 7,500,000,000 ordinary shares of 50 kobo each at N240.00 per share.

In April 2024, Emerging Africa Asset Management Limited listed a total of N5.55 billion instrument, while VFD Group Plc listed N12.5billiion following its Rights Issue of 63,342,455 ordinary shares of N0.50 each at N197.33 per share on the basis of one new ordinary share for every three ordinary shares held as at 12 October 2023. On its part, Royal Exchange listed N1.56 billion worth of shares in April 2024 while AVA Global Asset Managers Limited and Cadbury Nigeria Plc listed N4.08 billion and N N7.04 billion, respectively in May 2024.

In addition, Multi-Trex Integrated Foods Plc listed N2.5 billion in June 2024.

The report revealed that Tantalizers Plc, Wema Bank Plc and Notore Chemical Industries Plc listed N1.07billion, N39.95 billion and N105.79billion, respectively in July 2024.

Meanwhile, analysts have warned that the country’s debt profile is becoming unsustainable.

 “Ways and means refer to the CBN’s lending to the Federal Government. The DMO said that the “securitization of ways and means” is not unusual and is a common practice in many countries, but it is not a decision that can be made by the DMO alone,” said Vice President, Highcap Securities Limited, Mr. David Adnori,

Adnori expressed concerns that Nigeria’s rising debt profile could become unsustainable if not managed properly.

Adonri, noted that listings of new companies have been low for some years, noting that the market had witnessed more companies delisting than new entrants.

He noted that investors’ confidence is still low especially in the primary market segment, noting that the ability to form capital has diminish in the market, which is also a major reason why companies delist on the NGX.

He explained, “The major oil companies in Nigeria should be compelled to list on the daily official list of the Exchange as they contributed largely to the nation’s GDP.”

Adnori called on the government to induce the oil companies and other multinational companies by introducing tax holidays and other incentives such as government contracts to make listing attractive to them.

Recently, the Group Chief Executive Officer, NGX Group Plc, Mr Temi Popoola outlined strategies to drive listings, tackle delistings and other market challenges, emphasizing the importance of government policy and alternative asset classes.

Popoola highlighted the role of government policy in driving listings, citing historical successes such as the indigenization policy of the 1970s. He stated, “Policy can drive companies to list if the government wills it, and it worked during the indigenization policy of the 70s.”

He remarked, “If you have 10 companies that delist with an aggregate value of N50billon, you can have 2 listings with an aggregate value of N5trillion.”

Also recently, a Professor of Finance and Capital market, Uche Uwaleke called on the need for the government to unlock the huge potential of long-term financing inherent in the capital market and ensure borrowings tied to infrastructure bonds.

He said this became necessary for the nation’s economy to grow steadily at 16 per cent per annum over the next six years to attain the projected $1 trillion economy by 2030.

Uwaleke stated that with the nation’s infrastructure investment need which had continued to widen, and government debt profile which is substantially high, mobilising long-term financing through the capital market and deploying domestic market borrowings into infrastructure bonds had become critical to achieving the target.

Financing this huge infrastructure gap presents a formidable challenge to the government given Nigeria’s low revenue-to-GDP ratio of less than 10 per cent making inevitable the capital market route.

However, Uwaleke pointed out that the nation’s capital market is currently beset with myriads of challenges, which had continued to constrain its full development despite giant strides achieved in the last two decades.